Earnings before taxes and the provision for taxes consisted of the following:
| Years Ended March 31, | |||||
|
| 2017 |
| 2016 |
| 2015 |
|
| (In thousands) | ||||
Pretax earnings: |
|
|
|
|
|
|
U.S. | $ | 609,589 | $ | 745,194 | $ | 541,371 |
Non-U.S. |
| 18,769 |
| 23,717 |
| 20,047 |
Total pretax earnings | $ | 628,358 | $ | 768,911 | $ | 561,418 |
|
|
|
|
|
|
|
Current provision (benefit) |
|
|
|
|
|
|
Federal | $ | 38,723 | $ | 118,974 | $ | 112,634 |
State |
| 10,818 |
| 15,988 |
| 14,248 |
Non-U.S. |
| 3,334 |
| 3,303 |
| 2,599 |
|
| 52,875 |
| 138,265 |
| 129,481 |
Deferred provision (benefit) |
|
|
|
|
|
|
Federal |
| 160,527 |
| 125,950 |
| 67,306 |
State |
| 15,210 |
| 12,561 |
| 5,256 |
Non-U.S. |
| 1,322 |
| 3,134 |
| 2,634 |
|
| 177,059 |
| 141,645 |
| 75,196 |
|
|
|
|
|
|
|
Provision for income tax expense | $ | 229,934 | $ | 279,910 | $ | 204,677 |
|
|
|
|
|
|
|
Income taxes paid (net of income tax refunds received) | $ | 36,880 | $ | 141,901 | $ | 195,072 |
The difference between the tax provision at the statutory federal income tax rate and the tax provision attributable to income before taxes was as follows:
| Years Ended March 31, | |||||
|
| 2017 |
| 2016 |
| 2015 |
|
|
| ||||
Statutory federal income tax rate |
| 35.00% |
| 35.00% |
| 35.00% |
Increase (reduction) in rate resulting from: |
|
|
|
|
|
|
State taxes, net of federal benefit |
| 2.66% |
| 2.34% |
| 2.21% |
Foreign rate differential |
| (0.31)% |
| (0.24)% |
| (0.32)% |
Federal tax credits |
| (0.41)% |
| (0.19)% |
| (0.29)% |
Dividend received deduction |
| (0.03)% |
| (0.02)% |
| (0.03)% |
Other |
| (0.32)% |
| (0.49)% |
| (0.11)% |
Actual tax expense of operations |
| 36.59% |
| 36.40% |
| 36.46% |
Significant components of our deferred tax assets and liabilities were as follows:
| March 31, | |||
|
| 2017 |
| 2016 |
|
| (In thousands) | ||
Deferred tax assets: |
|
|
|
|
Net operating loss and credit carry forwards | $ | 1,948 | $ | 1,462 |
Accrued expenses |
| 168,331 |
| 185,088 |
Policy benefit and losses, claims and loss expenses payable, net |
| 21,287 |
| 21,911 |
Unrealized losses |
| – |
| – |
Total deferred tax assets | $ | 191,566 | $ | 208,461 |
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
Property, plant and equipment | $ | 986,334 | $ | 831,914 |
Deferred policy acquisition costs |
| 20,901 |
| 20,557 |
Unrealized gains |
| 19,140 |
| 9,593 |
Other |
| 200 |
| 9 |
Total deferred tax liabilities |
| 1,026,575 |
| 862,073 |
Net deferred tax liability | $ | 835,009 | $ | 653,612 |
The net operating loss and credit carry-forwards in the above table are primarily attributable to $29.0 million of state net operating losses that will begin to expire March 31, 2018 if not utilized.
ASC 740 prescribes a minimum recognition and measurement methodology that a tax position is required to meet before being recognized in the financial statements. The total amount of unrecognized tax benefits at March 31, 2016 was $23.9 million. This entire amount of unrecognized tax benefits if resolved in our favor, would favorably impact our effective tax rate. During the current year we recorded tax expense (net of settlements), resulting from uncertain tax positions in the amount of $2.8 million. At March 31, 2017, the amount of unrecognized tax benefits and the amount that would favorably affect our effective tax rate was $26.7 million.
A reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period are as follows:
| Unrecognized Tax Benefits | |||
|
| March 31, | ||
|
| 2017 |
| 2016 |
|
| (In thousands) | ||
|
|
|
|
|
Unrecognized tax benefits beginning balance | $ | 23,912 | $ | 19,929 |
Additions based on tax positions related to the current year |
| 2,964 |
| 4,313 |
Reductions for tax positions of prior years |
| (156) |
| (327) |
Settlements |
| – |
| (3) |
Unrecognized tax benefits ending balance | $ | 26,720 | $ | 23,912 |
We recognize interest related to unrecognized tax benefits as interest expense, and penalties as operating expenses. At March 31, 2016, the amount of interest and penalties accrued on unrecognized tax benefits was $5.9 million, net of tax. During the current year we recorded expense from interest and penalties in the amount of $0.8 million, net of tax. At March 31, 2017, the amount of interest and penalties accrued on unrecognized tax benefits was $6.7 million, net of tax.
We file income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With some exceptions, we are no longer subject to audit for years prior to the fiscal year ended March 31, 2014. No provision was made for U.S. taxes payable on undistributed foreign earnings since these amounts are permanently reinvested; the amount of this unrecognized deferred tax liability is not practical to determine at this time.